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Martin Flumenbaum and Brad S. Karp Martin Flumenbaum and Brad S. Karp

In United States v. Calderon, No. 17-1956 (2d Cir. Dec. 3, 2019), the U.S. Court of Appeals for the Second Circuit limited the availability of “windfall” restitution awards and narrowed its interpretation of the “proximate cause” requirement for financial fraud victims under the Mandatory Victims Restitution Act of 1996 (the MVRA), 18 U.S.C. §3663A. In an opinion written by Circuit Judge Debra Ann Livingston, and joined by Circuit Judges Amalya Kearse and Rosemary Pooler, the Second Circuit ruled that the MVRA “does not supply a windfall for those who independently enter into risky financial enterprises through no fault of the fraudsters,” where the financial loss at issue was not proximately caused by the defendant’s criminally fraudulent conduct.

Background

Defendants Pablo Calderon and Brett Lillemoe structured third-party transactions in the USDA’s Export Credit Guarantee program (GSM-102). Designed to “increase exports of agricultural commodities,” the GSM-102 program guarantees loans made by U.S. banks to foreign banks in connection with U.S. commodity exports to developing nations. 7 U.S.C. §5622(b)(1). Acting as GSM-102 financial intermediaries, the defendants facilitated foreign bank participation in the GSM-102 program by: (i) arranging a letter of credit between the foreign bank and a U.S. bank, and (ii) presenting certain compliant documents to U.S. banks in order for the U.S. bank to finance the USDA-guaranteed export transaction. The banks paid defendants fees for this service.

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